The PIC held about R350 million of Denel bonds in March 2017, but from December 2017 it started to dramatically increase those holdings. Photo: Supplied/Denel

JOHANNESBURG – The Public Investment Corporation (PIC) has thrown cash-strapped arms manufacturer Denel a lifeline by buying up about 90 percent of the company’s bonds, according to reports.

The previously undisclosed funding by the PIC, which manages R2 trillion of investments for the government, sheds new light on the precariousness of Denel’s financial position, Reuters reported on Thursday.

The PIC held about R350 million of Denel bonds in March 2017, but from December 2017 it started to dramatically increase those holdings, data from South Africa’s Central Securities Depositary analysed by Reuters showed.

As of December 14 this year, the PIC owned R2.8 billion of Denel bonds, out of the company’s total issuance of R3.15bn. The PIC bought the bulk of that debt via private placements in December 2017, September and December 2018.

It bought almost R2.5bn of debt – issued to refinance older borrowing – in September alone. That same month, Denel was unable to pay senior staff in full because of what it called “liquidity challenges”.

Additional reporting by Reuters.

BUSINESS REPORT ONLINE